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In the event
that you wish to challenge a Will we can
file the relevant documentation and
represent you in a Part four application
to the Supreme Court of Victoria seeking
that the Will be amended and you receive
your entitlements.
Making a legal Will ensures that your
assets will be distributed to the people
or persons you want. It gives your
partner a family certainty and reduces
the opportunity for dispute. Wills are
especially important if either you or
your partner have a child or children
from a previous relationship.
Also in circumstances where you are
not legally married to your partner,
making a legal Will gives you both some
comfort in knowing that you have agreed
on how your assets will be distributed
between family and friends.
We would also advise you to consider
issues relating to superannuation,
jointly held assets, and asset
protection for your beneficiaries.
Power of Attorney
A power of attorney grants another
person the right to act on your behalf
while you are alive but unable to act
for various reasons such as you are
overseas, uncontactable, sick or injured
or incapacitated. It can be a general or
limited Power of Attorney for a specific
purpose such as a medical power of
attorney (medical), or for a specific
purpose or event (such as completing
documents or certain transactions).
In the event you do not have a Power
of Attorney and become incapacitated,
your partner or family member will have
to apply to the VCAT Guardianship and
Administration list, which could be a
stressful and expensive legal option,
one that could have been avoided by
having a valid Power of Attorney.
Many people today make or draft their
own Power of Attorney or use a kit
version and this approach is fraught
with danger as if it is not witnessed
correctly or drafted incorrectly then it
is of no effect and invalid, thereby
exposing you to financial losses as a
result of failing or neglecting to
comply with your financial or
contractual obligations, or perhaps
worst still leaving a stranger to be
appointed to look after your affairs!
How do I make a Will?
"Thank you kindly for all the work
that you've done on my and my wife's
behalf. A big pressure has been taken
off our chests"
M. Elliot
Many people today make their own
wills and this approach is fraught with
danger. A will is a written declaration
that sets out how a person wants their
assets to be distributed to their
beneficiaries following death. It is one
of the most important documents that
anyone will ever execute at any time in
their life as it disposes of their
entire estate which represents the sum
total of all assets at a particular
point in time namely, the date of death.
Do-it-Yourself wills are dangerous as
they lack the knowledge required to
properly reflect the true intention of
the testator or testatrix and often fail
such that the intended beneficiaries do
not receive the gift/s referred to in
the will.
Everyone over the age of 18 should
have a will drafted by a lawyer to
ensure it is valid so your estate can be
distributed as quickly and as cheaply as
possible in the intended manner. On
death, without a will, your estate is
frozen and distribution delayed except
for the payment of funeral expenses.
With all wills even the simplest ones
there are a number of formal
requirements which have to be followed
and if not considerable expense may be
incurred by the estate to deal with
these matters.
Many people often put aside the
necessity to obtain a well drafted will
believing that it is unimportant and it
is something that can be attended to
later on. Unfortunately when death comes
it rarely heralds its approach,
accordingly why not make a valid will
now to avoid uncertainty and the costs
associated with either not making a will
or drafting something which fails to
properly express your true intentions.
We recommend to our clients they
should execute the following
documentation:
- A property drafted will;
- An enduring power of attorney
which covers all financial
decisions;
- An enduring guardian which
appoints a family member or
associate to make all relevant
medical decisions; and
- A death benefit nomination
settling the superannuation fund
beneficiaries.
What can you include in a Will?
When making a Will you can include:
- assets, such as houses, cars,
money, shares, cash
- rights and powers, such as the
right to appoint the trustee of a
family trust
- specific belongings such as
jewellery, books, photos – if you
list specific items make sure they
are easily identified.
Some assets, such as superannuation
and life insurance, may not be
distributed in a Will. For example, a
superannuation benefit may go directly
to the person nominated to the
superannuation fund. If you have
superannuation, make sure you nominate
the people that you want to benefit.
How can you change or cancel your
Will?
You can change your Will as often as
you like. The best way to change your
Will is to make a new Will.
You should also make a new Will if
you:
- marry or remarry; marriage
revokes (invalidates) any
pre-existing Will (unless it was
made in anticipation of the
marriage) so it is important to make
a new Will when you marry
- divorce or separate
- purchase a significant
asset/investment
- get involved in a new business,
company or trust.
Restructuring of Assets
Due to the widespread abolition of
death duties throughout Australia many
people fail to engage in proper estate
or succession planning. Many financial
and accounting advisers still refer to
restructuring of assets in an estate
planning environment. Unfortunately this
may have some unintended tax
consequences because where a
restructuring of assets takes place
there exists the very real possibility
that it will infringe the anti-avoidance
provisions of the Commonwealth Income
Tax Assessment Act 1936.
For the most part the community
believes that income tax is solely
restricted to a tax on income and
although for the most part this is
correct it also picks up capital gains,
for example, capital profits. The
purpose of the general anti-avoidance
provisions is to protect the integrity
of the income tax system by ensuring
that arrangements that have been
contrived to obtain tax benefits will
fail. The Tax Office looks at the
particular arrangement and has four
years within which it can amend a
taxpayer's assessment and where these
provisions apply a taxpayer will not
only be up for the increase in tax but
also for penalties and interest.
Interest is referred to as the GIC
(general interest charge) which is
currently accruing at the rate of 13.12%
having been recently increased.
Suffice to say there are a number of
matters which need to be considered and
whether it would be objectively
concluded that you or any other person
entered into a scheme or carried out a
scheme or any part of it for the sole or
dominant purpose of obtaining a tax
benefit? Proper succession planning will
avoid the problems associated with a
restructuring of assets.
Probate Lawyers - Deceased Estate
Administration
Grant of Probate / Grant of Letters
of Administration
Granting of Probate (Probate) or
Granting of Letters of Administration is
a process of the sealing by the
Victorian Supreme Court of the Will as
the Last Will and Testament of the
deceased or in the event they left no
Will then granting letters so that the
estate can be administered. Estates can
often be administered in Victoria
without a grant of probate. We can
advise when this cost saving course can
be taken and the advantages and
disadvantages of not applying for
probate. Without Probate / Letters of
Administration executors can be
personally liable to disappointed
beneficiaries.
Save Costs
We work with executors, having them
do as much of the work as they would
like to - minimising the costs to the
estate. Alternatively, we can take all
the worry out of the administration of
your estate, by doing all the work from
start to finish, including arranging for
the safe storage of assets and their
distribution.
Executor Duties
Executors are responsible for
administering the estate of the deceased
in accordance with the provisions of the
Will. A vital aspect of these duties is
that Executors must move quickly to make
sure the Estate assets are secured and
adequately insured. An executor is a
person (or sometimes more than one
person) named in a Will to carry out the
wishes of the Will-maker after their
death. Often solicitors or specialist
trustee companies are named as
executors.
The executor may have to:
- Control the Estate in accordance
with the provisions of the
Administration and Probate Act 1958
(Vic);
- collect all the assets and have
them valued, if needed
- find out what debts are owed and
pay them from the money made by
selling the assets
- pass on the assets to
beneficiaries
- arrange tax returns
- claim life insurance
- arrange the funeral
- apply for a grant of probate
- distribute the estate according
to Will
- take or defend legal action on
behalf of the estate.
An executor must be over 18 when they
apply for a grant of probate.
What is a grant of probate?
A grant of probate is a court order
giving the executor permission to carry
out what the Will says. Not every Will
needs a grant of probate, but it is
usually required if there is real
estate, or large sums of money or
shares. To apply for a grant of probate
official forms must be completed and
submitted to the Probate Office of the
Supreme Court. This is usually done by
the Will's executor.
What if no executor is named in the
Will?
If the Will-maker didn’t appoint an
executor, usually the major beneficiary
of the Will is appointed to administer
(deal with) the estate. This person who
takes on the responsibility of
administration is called the
administrator. The administrator has the
same responsibilities as the executor.
However, they must apply to the Probate
Office of the Supreme Court for ‘letters
of administration’, as opposed to a
grant of probate.
What happens if someone dies without
a Will?
f you die without a Will the law
decides who gets your assets. This is
called ‘dying intestate'. Assets of the
estate will usually pass to your
surviving spouse/partner and children,
and then next-of-kin. The estate does
not pass to the government unless the
deceased has no living relatives.
If there is no valid Will then an
application must be made to the Supreme
Court for ‘letters of administration’,
rather than a grant of probate.
Is a Will valid if it hasn’t been
made following the official guidelines,
for example, if it isn’t signed?
If a document that doesn’t strictly
meet the requirements for a valid Will,
the Supreme Court can still grant
probate if the court is satisfied that
the Will-maker intended the document to
be their Will. The court can also make
decisions about changes or additions to
Wills and rectify any obvious errors.
Estate or Inheritance Disputes
It should be noted that where a valid
will has been made it us unlikely that
it will be overturned. Most of the
problems involving contested wills
depend upon whether the document which
purports to be the last will and
testament of the deceased is in fact
valid. Essentially the will can be
attacked on the following bases:
- it was not the last will and
testament of the deceased;
- it does not constitute a valid
will as the requisite formalities
have not been followed;
- the deceased lacked the
necessary mental capacity to make a
will;
- it was altered after it was
signed;
- it was procured by undue
influence or fraud; or
- it was revoked.
Apart from the matters referred to
above a will may be attacked under the
Family Provisions to remedy a situation
where dependents believe they have not
been provided for (refer below). The Act
enables an eligible person to apply for
a share or a greater share of an estate,
however they must establish need and
prove that the testator did not make
adequate provision for them in the
estate for their maintenance,
advancement or education in life.
Basically the eligible person is
normally concerned with questions of the
reasonableness of provision. Eligible
persons are:
- The deceased's spouse at the
date of death;
- Someone with whom the deceased
was living in a domestic
relationship;
- A child of the deceased person;
- A former spouse of the deceased
person;
- A dependent of the deceased,
which may include persons related or
unrelated to the deceased, including
foster children and persons in a
same-sex relationship.
Where an order of the court is being
sought to change a will, the court will
address whether:
- The eligible person has been
left without adequate provision for
their proper maintenance, education
and advancement in life; and
- If yes, what provision if any
should have been made out of the
estate to assist that person?
Technically all claims by an eligible
person under the Act should be made
within 6 months of the date of death of
the deceased person. Exception is only
available with leave of the court in
very limited circumstances.
Realistically all claims should be made
well within time to overcome the
possibility of the estate having been
distributed otherwise the costs to deal
with this will be substantial.
When can a Will be challenged?
It is unlikely that a validly made
Will will be overturned. Essentially,
any challenge will revolve around
whether the document that purports to be
the Last Will and Testament of the
Deceased is valid.
If a Will is valid, there may still
be a reason for a party to claim that
they have not received adequate
provision under the Will as part of a
Testator Family Maintenance Claim i.e
challenging a will.
he Administration and Probate Act
(Vic) specifies that any person for whom
the Deceased had a responsibility to
make provision can make an application
to court to contest the Will.
‘Responsibility’ does not equate with
‘dependence’, and so the court may
consider many types of family relations,
and even long-term friends or carers, to
be in such a position.
A focus of a TFM claim will be
whether ‘inadequate provision’ has been
made for the claimant. In general, a
person can leave property through a will
to whomever they please. However, a
competing interest is the moral duty
that a person should make adequate
provision for the maintenance and
support of those closest to them. The
Court is given the task of deciding
which interest is paramount in any given
case. In practice, this gives the court
quite a bit of discretion on this issue.
A Will can be challenged if:
- The person making the will
didn’t have the capacity to make a
Will at the time they signed it;
- The will was made under the
influence of others (undue
influence);
- A person you had a
‘responsibility’ to provide for,
believes you haven't left them a
fair share of your assets commonly
referred to as a part 4 Application.
- Any person who can show that the
Will-maker had a ‘responsibility’ to
provide for them can challenge a
Will by starting a Supreme Court
process called ‘testator’s family
maintenance’.
The court will look at:
- whether the person who died had
a responsibility to provide for the
applicant
whether adequate provision was made
for the applicant
- if not, what provision should be
made
- the physical, mental or
intellectual disability of the
applicant and any other beneficiary.
You must apply for a testator's
family maintenance claim within six
months of the grant of probate or
letters of administration being made
Succession Plan - Discretionary
Trusts
What is a Discretionary Trust?
Assets owned by a trustee on trust
for a discretionary trust, are held for
the benefit of all the potential
beneficiaries, accordingly they are not
“owned” by you and do not form part of
your estate (save for gifting the
assets) in the event of death or
incapacity. Notwithstanding you do not
own the assets of the trust you
effectively control them and derive
benefit from the trust. Discretionary
Trusts are usually expressed to have a
life of 80 years and so they will often
survive the person who originally
arranged to set them up. Even if you are
the personal trustee of your family
trust, the trust will usually continue
to have life after your death.
Control of the trust
There are normally two levels of
control:
- The trustee, who administers the
trust and exercises discretion year
by year as to whom income/capital is
paid to; and
- The Appointer/Principal, who has
power to hire and fire the trustee.
If you are a personal trustee:
- We will need to consider what
the Trust Deed says about:
• Change of trustee; and
• Death or incapacity of a trustee.
- It may be that the Trust Deed
has contemplated these situations
and no action need be taken.
- If not, a Variation of Trust
will probably be required.
If your trust has a corporate
trustee:
- Some potential issues may be who
are the shareholders? Who will these
shares pass to under your Will or
does the corporate trustee
constitution have any limitations on
how shares can be transferred or
otherwise dealt with?
- Does the company constitution
require more than one shareholder?
- What does the constitution say
about appointment of directors?
Generally the power to hire and fire
directors rests with the
shareholders. Will there be an
undesired single controlling
director before the estate can act?
While the power to hire and fire may
be with the shareholders this may
not prevent a single director acting
before a replacement/additional
director is appointed by your
estate.
Ensuring that control moves to
those you intend
Both levels of control must be
considered and effectively passed on to
your chosen person(s) otherwise the
wealth (assets) in the trust may end up
with those you do not intend.
Accordingly you would need legal advice
to avoid any issues.
Control at Appointor/Principal
level
Assessing the succession of control
at this level is even more critical.
- What the Trust Deed says about
succession control as this power is
often a personal one and so without
express provision in the Trust Deed
it will not pass to the executors of
the deceased
- What about the Appointor. Is
there provision in the Deed for the
next Appointor as often the
Appointor will need, via Deed to
appoint their successor. Accordingly
it may be necessary to amend the
Trust Deed to provide for a more
robust succession mechanism.
Who does the new controller give
the wealth to?
When you have multiple beneficiaries
and they are not all appointed as
“controllers”, the potential exists for
the controller to divert the wealth for
their own personal benefit at the
expense of other beneficiaries.
Accordingly you would need to prepare a
Desired Beneficiaries Expression of Wish
in your Will.
Trust splitting or Trust cloning?
If you appoint all your beneficiaries
as controllers, a potential issue is
that they may not be able to agree on
the manner of dealing with trust
property, this may be alleviated via the
Expression of Wish document. In the
event there is real possibility of
disagreement, you may need to consider
splitting or cloning the trust which
requires careful and early (before
death) advice. Seeking such advice and
can be a very powerful and cost
effective way of moving assets and asset
protection structure to the next
generation of your family.
Testamentary Discretionary Trusts
A "Testamentary Trust" is simply a trust
established in your Will. Unless Asset
protection for a beneficiary is a driver
this is usually only warranted for
larger estates with a net value of
$500,000.00+ to be settled on each
Testamentary Discretionary Trust.
It has been common practice for many
years for simple trusts to be
established in a Will, for example
monies held on trust for infant children
until they reach a certain age.
Testamentary Discretionary Trusts (TDT's)
are much more sophisticated, in that:
- A separate TDT can be established for
each of your intended beneficiaries
- Each intended beneficiary is then
placed in control of their own
particular TDT, (which may only occur on
them attaining a certain age)
- The beneficiaries of each TDT can be a
potential broad category of people.
Example: You have two children and wish
to create a trust in your Will for each
child.
Your Will provides that one half of your
estate is settled on each trust. Each
child (on attaining a certain age) would
take control of their own trust.
The advantage(s) is that the property is
not owned by the child personally but by
the child on trust for that trust.
First Advantage - asset protection. Each
child has a broad group of people that
they can choose to benefit from their TDT, including themselves, their spouse
and their children.
Second Advantage - children are treated
as adults for taxation purposes under
this type of trust. Therefore income can
be effectively split for potentially
huge taxation benefits. Beneficiaries
can be narrowly or broadly defined. It
is usual that capital beneficiaries
would only include your direct
descendants.
Third Advantage - potential protection
of parts of your estate for subsequent
generations without being dragged into
property settlement disputes on
matrimonial or defacto relationship
breakdown.
For more
information please
contact us.
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